SEQUIM –– The City Council has unanimously decided to proceed with eminent domain on a yellow house at 191 W. Spruce St., hoping to wrestle it from the bank that owns the note on the house to make room for parking and access to the new City Hall under construction.

City Attorney Craig Ritchie said Monday night the city has three short sale agreements with the house’s owners, Steven and Peggy Sutherland of Renton, but the financial institutions that purchased the loan are owed more than that price.

With construction of the $16 million city complex underway, Ritchie recommended the eminent domain declaration to speed the process of acquiring and demolishing the property.

“Eminent domain is the last resort that cities and counties and states like to take,” he said. “But we believe this is clearly a public use.”

City Manager Steve Burkett hoped the eminent domain declaration would prompt the holders of the mortgage to negotiate a sale with the city.

“Hopefully, we can come to an agreement with the owners of the mortgage,” he said.

“If we can’t agree, we go to court and have a jury decide what the property’s worth.”

A short sale

The city’s purchase agreements with the Sutherlands have been for $89,000, Ritchie said.

But the Sutherlands owe $140,000 on the mortgage that was issued by Countrywide, the mortgage firm that was purchased by Bank of America in 2008 after failing because of the U.S. housing market collapse.

City officials have been working with the loan-holder through the Sutherlands’ real estate agent for years, Ritchie said, but have not been able to close that $50,000 gap.

Notice of the city’s eminent domain declaration was sent to the Sutherlands and to Specialized Loan Servicing, a debt collection agency based in Littleton, Colo.

There was no comment from the public during a hearing held at Monday’s council meeting.

Ritchie noted the parking spaces that would be sited on the lot are required by city code, which mandates buildings must provide a certain amount of parking in relation to their square footage.

Construction of the 34,000-square-foot City Hall began in April with Seattle-based Lydig Construction as lead contractor on an $11.85 million contract with the city.

Construction ongoing

Burkett said preparation of the site is nearly finished, and crews were scheduled to begin laying concrete for the building’s foundation this week.

Lydig crews are expected to begin erecting steel support beams as soon as next month, Burkett added.

When it is built, the city’s administrative offices, public works department and police station will share a single building for the first time.

City departments are currently spread among rented buildings throughout the city.

The new civic center is expected to be open in the summer of 2015.

Bond-financed

The city is paying for the project primarily with a $10,439,000 bond issued at a 4.53 percent interest rate last July.

The first payment this year will cost the city $580,000.

The bonds will be repaid from several sources: $225,000 from a public safety tax approved by voters in 2012, which raised the city sales tax by 0.1 percent; $200,000 from elimination of current rent for city office space, including the Sequim Village Shopping Center spaces; $75,000 from the real estate excise tax; and $160,000 from excess budget capacity.

Other funding sources include $2,190,200 in reserved funds from real estate excise taxes and operational savings; $1.5 million each from the water and sewer funds; $275,000 from the 0.01 percent public safety tax approved by voters in 2012; and $170,000 in expected real estate excise taxes for 2014.